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Business Inventories Up 0.7% in September

Inventories in the U.S. climbed at a slower pace than sales in September, indicating companies were heading into the disruptions caused by superstorm Sandy with little oversupply.

The 0.7 percent increase in goods on hand followed a 0.6 percent gain in August, Commerce Department data showed today in Washington. Sales at factories, wholesalers and retailers rose 1.4 percent, the biggest gain since March 2011, after advancing 0.6 percent the prior month.

The drop in retail sales as the storm struck last month may challenge companies to keep enough goods stockpiled just as spending languishes under the threat of changes in domestic fiscal policy next year. At the same time, preparations for holiday purchases and a need to boost dwindling inventories may help bolster production through year-end.

“The fiscal cliff is going to keep businesses cautious,” David Sloan, a senior economist at 4Cast Inc. in New York, said before the report. “They’re going to want to keep inventories reasonably lean.”

The increase in inventories compared with a median forecast for a 0.6 percent gain, according to 45 economists surveyed by Bloomberg. Estimates ranged from no change to a 0.8 percent rise. August stockpiles were unrevised from the prior estimate.

Other reports today showed retail sales fell in October for the first time in four months, and wholesale prices dropped unexpectedly.

The 0.3 percent decrease in retail purchases followed a 1.3 percent September advance that was larger than previously reported, Commerce Department figures showed. The government said it was able to collect information from the areas affected by superstorm Sandy, even as it was not able to quantify whether it had a negative or positive impact on receipts.

Wholesale prices fell 0.2 percent in October, led by falling fuel and vehicle costs, the Labor Department also reported.

Auto demand dropped to a 14.2 million pace in October after the tempest slammed the East Coast during the auto industry’s busiest time of the month. Carmakers have said those sales should be made up by the end of the year.

Nissan alone estimates more than 6,000 Nissan and luxury Infiniti brand cars and light trucks are “un-saleable” because of the storm, Travis Parman, a company spokesman, said last week. Including used autos and those of individual owners, as many as 200,000 may have to be replaced, said Larry Dixon, senior analyst for the National Automobile Dealers Association.

Inventory, Sales

At the current sales pace, businesses had enough goods on hand to last 1.28 months in September, down from 1.29 months in August.

Companies such as Denver-based Molson Coors Brewing Co. have yet to see a rebound in sales at year’s end.

“We saw a decline in consumer demand across our businesses in the third quarter and we expect the fourth quarter to be the most challenging of this year with difficult profit comparisons in Canada and the UK and higher costs in the U.S. and Central Europe,” Peter Swinburn, the company’s president and chief executive officer, said on a Nov. 7 conference call.

In addition to “continued industry weakness,” the National Hockey League lockout, as a result of a dispute between the league and its players’ union, has negatively impacted business, Swinburn said.

Retailers’ inventories, the only part of today’s stockpile report not previously released, increased 0.3 percent as sales advanced 1.3 percent. That pushed the inventory-to-sales ratio down to 1.36 months from 1.38 months in August.

Employment figures released earlier this month by the Labor Department showed the economy added 171,000 workers last month after a revised 148,000 gain in September that was more than initially estimated. The jobless rate rose to 7.9 percent from 7.8 percent as more people entered the labor force.

The Federal Open Market Committee, aiming to spur growth and reduce unemployment, on Oct. 24 affirmed plans to buy $40 billion of mortgage-backed securities each month without specifying the total size or duration of the purchases.

Wholesale inventories, which account for about 30 percent of all business stockpiles, jumped at a higher-than-expected 1.1 percent in September as sales also advanced, Commerce Department data showed. Factory inventories, which comprise about 38 percent of the total, climbed 0.6 percent in September for a second month.

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